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Asian stocks rose at the open, and the dollar strengthened on confirmation that the US and China will hold dialogue, spurring optimism that trade tensions between the world’s two largest economies will ease.
A gauge of regional equities gained, while index futures for the S&P 500 rose 0.8% on news that Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer will meet with the Chinese government this week in Switzerland. The Australian dollar edged higher, while gold and Treasuries fell.
The meeting will be first confirmed trade talks between the countries since President Donald Trump announced sweeping tariffs last month, led by punishing levies on China. Financial markets had gyrated on concerns that Trump ratcheting up his global trade war by imposing the highest levies in a century, and Beijing retaliating – will push the global economy into a recession.
“The US-China headlines helped to stabilise sentiment,” said Christopher Wong, a foreign-exchange strategist at Oversea-Chinese Banking Corp. The announcement is “aiding the rebound in pro-cyclical currencies,” while safe haven proxies, including long positions in the yen, Swiss franc and gold are unwound, he said.
The planned talks may encourage investors eager to see a reduction in tariffs that risk crippling trade between the countries. Trump placed duties as high as 145% on many Chinese imports, and Beijing retaliated with import taxes of 125% on American goods. The moves prompted companies to withdraw guidance and threatened to drive up prices for manufacturing equipment as well as day-to-day items such as clothing and toys.
The S&P 500 closed down 0.8% on Tuesday after Trump said he would prescribe tariff levels and concessions for partners looking to avoid higher duties, appearing to move away from the idea that he would engage in back-and-forth negotiations. That spurred gains in Treasuries, which also climbed after a solid $42 billion sale of 10-year bonds.
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In Asia, China’s central bank and financial regulators will hold a press briefing at 9 am in Beijing to discuss policies aimed at stabilising markets. The briefing will be closely watched as the country faces intensifying pressure from US tariffs and growing concerns over its economic outlook. Elsewhere in the region, traders in Japan return after a two-day holiday.
In geopolitical news, India said it conducted targeted military strikes against Pakistan, an expected move after it pledged retaliation for a militant attack last month in Kashmir that killed 26 people. Pakistan said it shot down five Indian aeroplanes and took Indian soldiers as prisoners.
Investors are also focused on Wednesday’s rate decision by the Federal Reserve, with traders expecting policymakers to stay on hold.
While Trump has been ratcheting up pressure on the central bank to resume cutting rates, officials have mostly emphasised a need to wait and see how trade policies implemented last month affect the economy.
“If traders wish to believe that the Fed will come to the rescue of the world tomorrow and assuage the recent rise in policy uncertainty and political uncertainty with a signal of overt ‘dovishness’, they should think again,” said Thierry Wizman at Macquarie.
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(Edited by : Juviraj Anchil)
